GRIPS 政策研究センター Policy Research Center

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Oct 1, 2009 Report No:09-15

Lifecycle Funds and Wealth Accumulation for Retirement: Evidence for a More Conservative Asset Allocation as Retirement

Author
  • Pfau WadeGRIPS
Field Economics
Language English
Abstract

A line of recent studies cast doubt on the efficacy of the lifecycle investment strategy, which calls for switching into a more conservative investment portfolio as retirement approaches, as a suitable way to provide for the retirement needs of workers with defined-contribution pensions.
After comparing simulation outcomes for lifecycle and fixed asset allocation strategies, we determine that the lifecycle strategy can be justified even in a framework including only financial wealth. We find that investors with very reasonable amounts of risk aversion may prefer the lifecycle approach, despite the tendency for aggressive fixed allocation strategies to produce larger expected wealth.

Journal of Economic Literature Classification Number: D14, D81, G11, G23

Keywords lifecycle funds, target date funds, retirement planning, asset allocation
attachment 09-15.pdf